How to Invest in JSE Top 40 Index

Roberto Rivero

The JSE Top 40 Index is one of two major stock indices composed of companies listed on the Johannesburg Stock Exchange. What are the JSE Top 40 companies in 2022? And how has the index performed in recent years? In this article, we will answer these questions and explain how to invest in JSE Top 40 and how to trade the index using CFDs. 

What Is the JSE Top 40 Index?

The JSE Top 40 Index, sometimes referred to as the FTSE/JSE Top 40 Index or the South Africa 40 Index, is a stock index which consists of the 40 largest companies listed on the Johannesburg Stock Exchange (JSE) by market capitalisation

Although its 40 constituents only represent around 10% of the approximately 400 companies listed on the JSE, combined they represent around 80% of its total market capitalisation. Therefore, the JSE Top 40 Index is generally considered a reliable reflection, or a benchmark, of the wider South African stock market. 

As well as the JSE Top 40 Index, there is also the JSE FTSE All Share Index which represents 99% of the full market capital value of the JSE, subject to minimum freefloat and liquidity requirements. 

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JSE Top 40 Companies List 2022

So, now we know what the JSE Top 40 Index is, what are the JSE Top 40 companies? In the table below, we have compiled a list of the index’s constituents in 2022.

JSE Top 40 Companies List 2022
Absa Group Limited Anglo American Anglo American Platinum Anglogold Ashanti
Anheuser-Busch InBev Aspen Pharmacare BHP Group BidCorp Ltd
Bidvest Group British American Tobacco Capitec Bank Clicks Group
Compagnie Financiere Richemont Discovery Ltd Exarro Resources Firstrand Limited
Glencore Gold Fields Growthpoint Impala Platinum
Investec Ltd Investec PLC Mondi Plc Mr Price Group
MTN Group MultiChoice Group Naspers Nedbank Group
NEPI Rockcastle Northam Platinum Holdings Old Mutual Prosus
Reinet Investments Remgro Sanlam Sasol
Shoprite Sibanye Stillwater Standard Bank Group Vodacom
Woolworths

Source: FTSE Russell – FTSE/JSE Top 40 Constituents as of 20 May 2022  

If you are interested in how to invest in JSE Top 40, it is naturally a good idea to be aware of the companies which are in the index, as their performances drive its price.  

However, the index’s constituents are weighted according to their market capitalisation, meaning that the companies with a larger market cap influence the overall index more than companies with a lower market cap, and vice versa. 

The top ten constituents account for almost 60% of the JSE Top 40, meaning that these ten companies have a greater effect on the direction of the index than all the others. Therefore, if considering investing in JSE Top 40 you should aim to be familiar with these ten companies, their performance and their future outlook.

Top 10 Constituents of JSE Top 40
Top 40 Index Weighting Sector Top 40 Index Weighting 
Compagnie Financiere Richemont Personal Goods 14.74%
Anglo American Industrial Metals and Mining 13.35%
Naspers Software and Computer Services 5.19%
Firstrand Limited Banks 5.13%
MTN Group Telecommunications Service Provider 4.63%
Standard Bank Group Banks 3.43%
Sasol Chemicals 3.33%
Gold Fields Precious Metals and Mining 2.89%
Capitec Bank Holdings Banks 2.81%
Prosus Software Computer Services 2.62%
Total - 58.12%

 Source: FTSE Russell – FTSE/JSE Top 40 Index Fact Sheet – 29 April 2022. 

JSE Top 40 Index Performance

Below, we can see the JSE Top 40 chart showing the index’s performance over the last ten years. 

Depicted: Admirals MetaTrader 5 – South Africa 40 Index Weekly Chart. Date Range: 7 June 2009 – 23 May 2022. Date Captured: 23 May 2022. Past performance is not a reliable indicator of future results.  

In the ten-year period ending 31 December 2021, the JSE Top 40 Index gained 136%, not accounting for dividend distributions.  

Despite following a clear upward trend in the chart above up until mid-2014, the index found itself stuck in a sideways channel for much of the following three years. 

In 2017, it broke out of this channel to the upside, before continuing its sideways movement until 2020 when, as with most of the world’s stock indices, it dropped sharply due to the outbreak of the coronavirus pandemic. 

After the plunge caused by the pandemic, the index recovered strongly, gaining 95% between its pandemic-low in March 2020 and the end of 2021.  

However, like many other stock indices, the JSE Top 40 has struggled so far in 2022 due to an increase in uncertainty caused by rising inflation and conflict in Ukraine. At the time of writing (24 May 2022) the index is currently down almost 8% for the year. 

How to Invest in JSE Top 40

So, how can you invest in JSE Top 40? 

There are many ways for you to invest in the South Africa 40 Index. If you want to gain exposure to the entire index, you could choose to invest in a mutual fund or Exchange-Traded Fund (ETF) which passively tracks it. 

These types of index funds pool investor capital in order to purchase shares in all the companies listed in the JSE Top 40, meaning that you can gain exposure to the entire index with a single investment. 

Alternatively, if you are not interested in investing in all the companies within the index, you could buy shares in the specific companies which you are most interested in. For example, if you wanted to build a portfolio based on the JSE Top 40 Index, you might choose to invest in the top ten constituents which we highlighted earlier. 

How to Trade JSE Top 40 Index

If you are wondering how to trade JSE Top 40 over a shorter time horizon, Contracts for Difference (CFDs) could be an option to consider. 

CFDs are a financial derivative product which represent a contract between two parties agreeing to exchange the difference in an asset’s price between the time the contract is opened and closed. 

CFDs allow traders to attempt to profit from both rising and falling markets, meaning that you can use CFDs if you are feeling either bullish or bearish on the JSE Top 40 Index. Furthermore, CFDs benefit from the use of leverage, which allows traders to open a larger position size with a smaller initial deposit.  

Consequently, leverage can magnify a trader’s potential gains. However, it must be used with caution, as it can just as similarly magnify potential losses on a losing trade. 

Amongst the many different instruments which can be traded with Admirals using CFDs are a variety of stock indices, including the JSE Top 40 Index. In order to start trading CFDs on the South Africa 40 Index, follow these steps: 

  • Open a Trade.MT5 account with Admirals 
  • Download, open and log in to the MetaTrader 5 trading platform 
  • Press Control + U to bring up the Symbols window, where you can search for the JSE Top 40, which is listed as the ‘South Africa 40 Index’. Once located, click ‘Show Symbol’ and then ‘OK’ 
Depicted: Admirals MetaTrader 5 - Symbols 
  • Head to the Market Watch tab on the left-hand side of the screen and locate the symbol for the index, right click and select ‘Chart Window’ in order to open the JSE Top 40 chart 
  • To make your first trade, press ‘New Order’ at the top of the screen to bring up the order window. Here, enter the desired size of your trade, enter a stop-loss and take-profit level and then click buy or sell to send your order to the market. 
Depicted: Admirals MetaTrader 5 – South Africa 40 Index Daily Chart – New Order. Date Range: 5 September 2019 – 24 May 2022. Date Captured: 24 May 2022. Past performance is not a reliable indicator of future results. 

Tips for Trading the South Africa 40 Index

Before we finish, we have some final tips on how to trade JSE Top 40 Index: 

  • Pay attention to the value of the rand. The index tends to be positively influenced by a weaker South African rand, and negatively influenced by a stronger rand. This is because many of the top-weighted companies in the index earn their income in foreign currency. Therefore, when their income is converted into local currency, if the rand is weaker, their foreign currency will buy comparatively more rand, having a positive effect on earnings. Conversely, when the rand is strong, foreign income will buy less rand, which will have a negative effect on earnings and, therefore, on the index. 
  • Keep an eye on major US indices. The performance of other major international stock indices generally have an effect on trader sentiment around the world. This is particularly true of the major US indices such as the S&P 500, the Dow Jones and the Nasdaq. US indices remain open long after the JSE has closed for the day and their performance during these hours can provide an indication of how the JSE Top 40 will perform upon opening the following morning.  
  • Keep up to date with market news. Perhaps an obvious tip, but important nonetheless. News releases throughout the trading day, and after the market close, can have a big impact on trader sentiment and, therefore, on the index’s performance. Make sure you are aware of any upcoming news announcements around the time you are planning to trade or whilst you have an open position. Our exclusive Premium Analytics portal is the ideal place for traders to keep abreast of the goings on in the market.  

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As well as individual stocks, you can trade CFDs on some of the most popular stock indices in the world, including the JSE Top 40 Index, FTSE 100 and S&P 500! Click the banner below to find out more and open an account today: 

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INFORMATION ABOUT ANALYTICAL MATERIALS:  

The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admirals investment firms operating under the Admirals trademark (hereinafter “Admirals”) Before making any investment decisions please pay close attention to the following:  

  1. This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admirals shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
  3. With view to protecting the interests of our clients and the objectivity of the Analysis, Admirals has established relevant internal procedures for prevention and management of conflicts of interest.
  4. The Analysis is prepared by an independent analyst Roberto Rivero, Freelance Contributor (hereinafter "Author") based on personal estimations.
  5. Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admirals does not guarantee the accuracy or completeness of any information contained within the Analysis.
  6. Any kind of past or modelled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admirals for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  7. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.
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